A call or conversation I often encounter is a discussion about the H-2A guest worker program. The Immigration and Nationality Act authorizes the lawful admission of temporary, nonimmigrant workers to perform labor or services of a seasonal nature. The Department of Labor has to verify that there are not sufficient U.S. workers qualified and available to fulfill the need. Therefore, each employer is required to initially recruit U.S. citizens for employment and to ensure the hiring of foreign workers will not have a negative effect on the wages and working conditions of similarly employed U.S. workers. Employers must pay the Adverse Effect Wage Rate. This is essentially a wage that ensures foreign workers are paid no less than what a U.S. citizen would be paid for seasonal work according to the U.S. Department of Labor or the most recent National Agricultural Statistics Service Farm Labor Survey.
The conversation lately among local tobacco production farms that use the H-2A program has been the increase in the adverse effect wage rate for 2020 to $12.40/hour. The profit margin in burley tobacco production has been minimal during the past several years. Multiple reasons for this include increasing input production expenses, increasing labor wage rates, and poor growing conditions that have kept yield per acre low. Wage rates increased 40 cents an hour from 2018 to 2019 and are set to increase 77 cents an hour for 2020. This has many producers questioning if continuing burley tobacco production in 2020 can be justified economically when yield and price received per pound has not followed the increasing trend of all related production expenses.
To determine how much affect the wage rate increase would have on overall profit in burley tobacco, I analyzed all field labor expenses broken down by activity for a three-acre field in Daviess County that averaged 2,267 pounds per acre in 2019. The yield was average but it was an overall excellent crop in appearance and growth. Set in May, excellent stand, no drowning, no weeds, no nutrient deficiency, no problems. It was a three-acre field that anyone would consider to meet their expectations.
A workforce of employees paid $11.63 per hour cared for the field from setting through all activities associated with stripping and market preparation. Total labor hours of 184.89 per acre were utilized to grow out the field. Setting required an average of 7.76 labor hours per acre including the driver. This cost $0.04/pound. The same hours at the 2020 wage rate would be $0.042/pound.
The field was no-till so weed control was excellent. Hand weed removal required only 1.51 labor hours per acre costing $0.0077/pound. The same hours at the 2020 wage rate would be $0.008/pound.
The field grew uniform requiring an initial topping pass with cleanup repeated only once. 11.12 labor hours were used at topping costing $0.057/pound. The same hours at the 2020 wage rate would be $0.061/pound.
Sticks were dropped in advance of harvest and the field was staked out three days after cutting. All but two trailer loads were housed in a barn adjacent to the field. Labor hours of 57.17 were required to drop sticks, harvest and house the field costing 29 cents per pound. The same hours at the 2020 wage rate would be 31 cents per pound.
Take down, stripping and baling are certainly the most time-consuming part of tobacco production. This farm uses a large tobacco baler but does hand remove leaves from plants piled onto tables versus using a stick conveyor chain aid. Labor hours of 107.33 were required to take down, move to location, strip, bale and bundle sticks, and costing 55 cents pound. The same hours at the 2020 rate would be 59 cents per pound.
The total calculated labor cost for this 2,267-pound crop at the current $11.63 wage rate was 94 cents per pound. The total cost at the $12.40 wage rate is $1.01 per pound.
The purpose of this exercise is to demonstrate that yield has much more influence on labor cost per pound than the wage rate. Also, these labor hour amounts are accurate and an option to plug into a budget if you are contemplating burley tobacco production in 2020. The UK tobacco production budgets are available online at http://agecon.ca.uky.edu/budgets. You can use these tools with your farm's numbers to determine how the increased wage rate will affect you.
Clint Hardy is the Daviess County Cooperative Extension Service agent for agriculture and natural resources. His column runs weekly in the Agriculture section.